“Very Simple” Business Model: Product Franchising

Abhay Clinics in India reaches BOP markets through a business model not yet discussed on NextBillion–product franchising. Whereas business franchisors provide franchisees with a complete business format–from administrative processes to branding and products–manufacturers that run product franchises license existing retailers to sell products under a franchise brand.

Since product franchising is a way for manufacturers to distribute their products through existing channels, it’s of course most appropriate in markets with existing retailers able to incorporate a given product into their offerings. Product franchising is compelling as a less intensive undertaking than business franchising, but may not work as a strategy for reaching rural communities that don’t have sufficient commercial infrastructure. That said, there is plenty of demand among existing retailers for new products to offer their customers.

The following is a brief profile of Abhay Clinics, unique among the franchises we’ve discussed on NextBillion as having been able to reach profitability in only 3 years of operation.

Abhay Clinics was established in 1999 by Indian Immunologicals, a manufacturer of vaccines for livestock as well as human diseases. The franchise serves as Indian Immunologicals’ delivery channel for its human vaccines into peri-urban, low-income markets with poor access to affordable vaccinations. Abhay contracts with doctor-run clinics to perform vaccinations at an agreed-upon price.

There are currently 2000 participating providers in Abhay’s network spread over 22 of India’s 28 states. Abhay plans to expand to 2500 clinics in 2007 and estimates that 5000 clinics will be necessary to provide service to all of India.

Depending on population density, doctors in the Abhay franchise administer anywhere from 2-100 vaccines per month. Abhay has determined that maintaining a franchise-wide average of 25 vaccinations per month per franchise ensures the business’ financial sustainability.

Abhay originally focused on getting rabies vaccines to market and contracted with doctors to offer complete dog bite treatments at the set price of INR200 (approximately US$4.95). In addition to the vaccine, doctors receive wound toilettries and instructions to wash the wounds thoroughly, a critical step often overlooked. Doctors purchase rabies treatment kits at INR160 each and earn a 20% margin. Abhay has since expanded its product offerings to include vaccines for MMR (measles, mumps and rubella) and hepatitis B, among other diseases.

Participating doctors are usually general practitioners or pediatricians. While the margins they earn on Abhay products are not significant, doctors receive several benefits from participating in the franchise:

1) Doctors enjoy free marketing and increased business, since patients who initially visit for treatment promoted under the Abhay brand often return for other services. Abhay widely advertises through several channels, including newspaper inserts, TV ads, flyer hand-outs, and school presentations.

2) Abhay has developed an efficient cold chain transportation process and supplies doctors with refrigerators at no cost. Doctors are able to use the refrigerators for vaccines besides Abhay’s.

3) To further incentivize doctors to join, Abhay provides an initial 30 vaccine doses to doctors for free.

Abhay employs around 100 surveyors and supervisory staff to oversee operations and monitor franchisees. Each surveyor monitors around 25 clinics, visits 1 clinic per day, and works 6 days per week, so that each clinic receives about one visit every month.

Mr. K.V. Balasubramaniam, Managing Director of Indian Immunlogicals, supplied the above information and stressed repeatedly that the Abhay model is “very simple” as I bombarded him with questions. A very simple, profitable way to deliver social good to the BOP? Bingo.